Cisco (CSCO)

They’ve done everything right. Continue to buy back their stock and manage their balance sheet effectively and efficiently. Net profit is 20%, EPS is 12%, income growth is 19%, total debt is only 35.4, Price to Book 2.4%, and ROE is close to 18%. However, you don’t need to be in the hardware manufacturing component. It just continues to be commoditized. You want to be more on the software side. He sold his holdings.

It is one of her higher holdings. It has been a bit of a show-me story. They have been really good at disrupting themselves and getting into new technologies. They have done well on the gross margin side. She thinks their shares will continue to climb higher. There is quite a bit of room to go.

On his radar screen, because it has a growth outlook to its earnings. A very high quality business. It has capital abroad that could be repatriated. The valuation is very, very reasonable at about 12.5X 2017 earnings.

A name that he likes. The industry leader. It is huge. Trading at a very reasonable valuation of about 13.5-14 times earnings. Earnings growth has been at the lower end, 2%-5% a year. Roughly 30% of the market cap is sitting in cash. If you X that out, you are looking at a 10X valuation, and he doesn’t think the market has put much on that. If repatriation for US companies happens, you are going to see some dividend increases and increased share buyback.

(A Top Pick Nov 6/15. Up 10.89%.) He still likes this. The growth is there and it is going to come. You get a good yield while you wait. It will give you a 10% return.

They have a massive balance sheet, $27 billion in cash, right now, but it is all held overseas. 3.3% dividend yield. The major player in the Internet of Things. They dominate the router and switches space. If Trump is able to get a tax holiday, where companies can repatriate cash, that is going to be a massive windfall for this company. Their balance sheet is AA rated. They have enough buying power to do acquisitions and navigate through the storm. The wave of the Internet of Things is real, and this is a key player.

Not when you think of tech stocks anymore. Trading at 12X earnings. Great dividend yield of 3.4%. The router business has been a much more difficult time for them, and he thinks they are going to grow slowly. They have some good growth coming over the next couple of years. Made a few small acquisitions which is really going to help them out in the future.

With a $150 billion market cap, has $40 billion in net cash, and throwing off $11-$12 billion a year of free excess cash flow. Selling for 9 or 10 times free cash flow. Every year the dividend goes up by double digits, and with all that cash, this dividend will double in the next 6-7 years or so. They remain as #1 in the world in each of their businesses. To buy a company like this at 10 or 11 times earnings and free cash flow, it is truly being given away for a company of this quality. Dividend yield of 3.5%. (Analysts’ price target is $33.15.)

The “Internet of Things” stock. It is really going to benefit from the increase you are seeing in mobile data traffic, which is going to increase threefold through to 2019 with traditional networking traffic, which is going to go up. They have their hands in a lot of different things. The only secular concern you have is the emergence of “Software Defined Networks”, where the hardware is being decoupled from the software. Cisco really sells products where the hardware and the software are completely integrated. If that happens, you could see a little margin pressure. They are trying to address that with their product offering. Longer-term he really likes this.

This is at the heart of the “Internet of Things”. Machines, appliances, etc. will be connected to the Internet in the next wave. This was one of the very large tech companies that was used as a source of funds in the last couple of weeks. He doesn’t think it’s fatal. The stock pulled back 7%-8% after making a new high just a few weeks ago. This is a conservative way to play the Internet of things, and is certainly one you could own. It generates tons of cash. (See Top Picks.)

He likes this because it has a strong free cash flow yield, in the 6% range. Pays a great dividend and is well run. The stock is starting to do better. This doesn’t have many competitors. He is not buying right now, but also not selling what he currently owns. 3.3% dividend yield.

Old style tech. Tremendous upside of 42%. It could come back to EBV+3 in bad markets. It is a dividend play also.

(A Top Pick Feb 27/15. Up 8.53%.) (BNN Showed “Oct 29/15” in error, so percentages may not be accurate.) They’ve been diversifying away from the meat and potatoes business, the slower growth of switches, routers, etc., but their existing business is still growing. A big part of their transition strategy has been acquisitions. They did 10 in 2015. This is still a buy.

It is a big cap name. It is in favour this year, but he does not see the growth drivers so far. They are similar to IBM. There is no lever to move higher. If you hold it, then hold it for now.

Caught up in a big transitional situation in the technology industry. What used to be done mechanically, in terms of switching, is now being done with software. If you are the biggest manufacturer in electronic switches, how do you transition yourself into the new world without losing market share? It turns out to be more difficult than people thought. Even though they had a dominant position 10 years ago, it has been losing market share, and he thinks it is a really difficult period for the stock. He wouldn’t recommend it.